There’s no doubt that cryptocurrency has become one of the dominant financial topics in the world today. From the various booms and crashes to the tech companies mining these resources, there’s a lot to discuss.
However, it can seem as though most of the coverage surrounding crypto is focused on the U.S. and China.
Yet, it’s important to understand that as a truly decentralized form of currency, crypto is proving powerful on a global scale.
Indeed, Africa is emerging as a key market for financial transactions in this form. One report found Africans received $105.6 billion of crypto payments between July 2020 and June 2021. This represents a significant shift in how people of this region are approaching their finances.
We’re going to take a moment to examine the crypto revolution in Africa. What are the primary components of this shift and what should people consider before engaging?
How is Cryptocurrency Influencing Africa?
There’s no doubt that crypto is seeing a huge amount of attention in Africa. It’s impossible for such a significant alteration in how Africans are handling their finances not to have a widespread impact. While cultural shifts may still be some years down the line, there are certainly clear areas in which the crypto uptake is affecting lives.
Among the most beneficial ways in which crypto is influencing Africa is in giving citizens paths to a certain amount of financial stability.
The lack of financial infrastructure in many areas of Africa often means tools such as mortgages and business loans are largely unattainable. Yet, more secure cryptocurrency networks have created a burgeoning crowdfunding network.
There are companies emerging that offer global partners opportunities to invest in and lend to African individuals and businesses. This is helping innovative startups to gain a foothold in their industries, particularly in the technology sector.
Another impact crypto is having is related to accessibility to trading. The long history of colonialism in Africa, alongside difficult agricultural environments, has resulted in the region experiencing significant poverty.
It also means there has been little financial infrastructure for those looking to make investments that could improve their lives. Crypto circumvents some of these infrastructural issues. All investors need is a smartphone and internet connection to access trading platforms. It doesn’t take a lot of capital to engage, either.
The average crypto investor in Africa spends about $20 initially. Indeed many Africans have been proactive in educating themselves via trading blogs to help them build better portfolios.
What are the Reasons for the Shift?
So, what are the reasons for the crypto revolution in Africa? To some extent, it’s in line with the global trend for in-person customer experiences to shift toward digital interactions. Alongside greater expectations for positive relationships with companies, consumers want brands and institutions to provide digital services that enhance their physical lives.
This could certainly be an influencer in the growing African popularity of crypto, with its purely online marketplace allowing them to invest in tangible goods and services. This is likely to develop as more brick-and-mortar businesses accept crypto directly as payment.
But the shift also has something to do with the rise of highly-educated young professionals in Africa. Digital natives are largely driving the rise of crypto and 70% of sub-Saharan Africa’s population is below the age of 30.
This means there is a generation of savvy, would-be entrepreneurs who do their research and are spotting gaps in the market. They often see crypto as a route to gaining investment for their enterprises and funding their innovations.
It’s also worth considering how crypto lends itself to more effective remote international operations.
African suppliers and business-to-business (B2B) companies are now able to meaningfully interact with big brands abroad with a currency that is more accessible to both parties.
Historically, currency transfers into Africa have been prohibitively expensive, making trade with corporations impractical and unsustainable. Part of the reason for the revolution may be the opportunities for African entrepreneurs to reach a genuinely global corporate audience.
What Are the Challenges?
As with any revolution, there are certainly challenges to overcome. We’re still very much in the early days of this shift. If the popular adoption of cryptocurrencies is to continue to grow, the prevalent issues need to be addressed.
Probably the biggest concern is the impact of cybercrime on crypto markets. Investors in Africa are largely connecting to trading platforms via smartphones and other connected mobile devices in the internet of things (IoT).
Unfortunately, IoT devices are particularly vulnerable to botnet attacks which hijack devices and download malware. Basic cybersecurity hygiene like strong passwords and the use of virtual private networks (VPNs) can mitigate this issue.
Nonetheless, these viruses can give hackers control of the data on the device, leaving crypto wallets accessed via the device open to theft. Indeed, there have been reports of phishing scams targeted directly at crypto investors.
Alongside security issues, the instability of the crypto market is another difficult challenge to navigate. Crypto markets have proven to be extremely vulnerable to external influences like news stories, tweets by Elon Musk, and regulatory efforts.
This is problematic in Africa when so many businesses and individuals are relying on a thriving crypto market for their financial health.
There are relatively few solutions here, given that crypto is decentralized and not subject to many of the same regulations as other markets. However, greater education on diversifying portfolios and tracking the crypto markets effectively can help individuals to navigate the risks.
Conclusion
There has been a significant rise in the adoption of cryptocurrencies in Africa over the last few years. This has been influenced by the ease of access to investment platforms and a more digitally-savvy generation of young professionals.
While this is continuing to have a largely positive impact on the region, it’s also important to recognize there are challenges.
Nevertheless, there is a sense that careful crypto growth can empower Africans to achieve financial stability and entrepreneurial innovations.
Image Source: Pexels
